Operation Twist – A Drag on Banks?

Again, the weakness in the financials was the topic of conversation on the floor with traders wondering if Ben Bernanke had made a terrible mistake.

Earlier in the week, the Fed chief introduced a plan to plan to sell $400 billion in shorter-term securities to buy longer-term holdings – a plan known on the Street as Operation Twist.

The Fed’s plan is to drive down Treasury yields further – in hopes of generating a ripple across the economy – one that would result in lower rates. In turn, the move could trigger increased mortgage lending as well as more business loans.

So why did banks sell-off? Stifel Nicolaus of Chris Mutascio explains why Operation Twist is more likely a bust for banks than a boon.

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